indifference curve

Suppose someone offers you a choice between two snack baskets: one with 3 cookies and 1 juice, another with 1 cookie and 3 juices, and you honestly feel they are equally good. An indifference curve simply joins up all the baskets you feel exactly the same about. Step along the curve and your happiness never changes; every bundle on it leaves you equally satisfied, which is why you would be indifferent between them.

These curves have a few telling features. They slope downward, because to keep you equally happy after taking away some cookies you must give back some juice. They are usually bowed in toward the origin, reflecting the fact that the more cookies and fewer juices you have, the more juice you would demand to part with another cookie, a consequence of diminishing marginal utility. Curves farther from the origin represent more of both goods and so more satisfaction, so higher is better. And two different indifference curves can never cross, because a crossing point would have to be equally good as two bundles that are themselves unequal, a contradiction.

Indifference curves are the modern, honest way to model preferences, because they need only ranking, not a made-up number of utils. Laid over a budget line, they reveal the consumer's best choice as the point where the budget line just touches the highest reachable curve. That picture underlies how economists explain demand, the response to price changes, and even welfare comparisons, all without ever pretending to measure happiness directly.